Municipals weaken again 10 years and out; Lower Colorado River brings $311.46 million of bonds

By Sheri Kasprzak

New York, March 5 - High-grade municipals were softer on Tuesday, particularly among longer-term bonds, market sources said.

Bonds outside of 10 years were off, and the worst performance was seen on the long end of the curve, said one trader.

Single A rated debt was actually a bit stronger, said a trader.

"The preference today seems to be lower-rated bonds, because that's the one bright spot of the market," he said.

"Higher-rated names are weaker."

Meanwhile, munis are still outperforming Treasuries, but mostly by not moving much, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

"Although tax-frees have underperformed Treasuries in the past two weeks, with [municipal-to-Treasury] ratios creeping a bit higher, the muni market has largely avoided the sharp swings of Treasuries," Schankel wrote Tuesday.

"Munis outperformed yesterday, but it was primarily by standing still as Treasuries rose. In the 10-year maturity, for example, the MMA AAA benchmark was unchanged at 1.82%, while the 10-year Treasury yield rose by 4 bps to finish at 1.88%."

California plans $2.4 billion

Looking ahead, the State of California released details Tuesday on its $2.4 billion sale of general obligation bonds.

The deal includes $1.09 billion of series 2013A various-purpose G.O. bonds, $1 billion of series 2013B various-purpose G.O. refunding bonds and $310 million of series 2013C taxable various-purpose G.O. bonds.

The bonds (A1/A/A-) will be sold on a negotiated basis with J.P. Morgan Securities LLC and Goldman Sachs & Co. as the senior managers.

"Fitch revised its outlook on the A- rating of California to positive ahead of next week's [$2.4 billion] general obligation sale," Schankel said.

"The outlook improvement reflects fiscal management improvements combined with two successive years of structural budget progress, with a future upgrade linked to the state's willingness to restrain spending growth."

The offering is expected to price on March 14.

Proceeds will be used to fund capital projects.

Lower Colorado bonds price

Heading up Tuesday's primary action, the Lower Colorado River Authority of Texas sold $311.46 million of series 2013 transmission contract refunding revenue bonds, said a pricing sheet.

The bonds (A2/A/A+) were sold competitively. The authority did not immediately return calls for the winning bidder.

The bonds are due 2014 to 2036 with term bonds due in 2039 and 2043. The serial coupons range from 3.25% to 5%. The 2039 bonds have a 4% coupon and priced at 100.453, and the 2043 bonds have a 4% coupon and priced at par.

Proceeds will be used to refund $320 million of transmission contract revenue notes.

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